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Intellectual Ventures: Independence Day Take II

News of Nathan Myhrvold’s Intellectual Ventures bringing a series of lawsuits should have displaced the above the fold headlines regarding the vague financial turmoil currently afflicting the U.S. and World Economy. Whereas one will pass, like kidney stones, with much watery eyed pain and gnashing of teeth, the other is far more insidious and potentially fatal to our collective future as a leading economy. Here’s why:

Just like in the story-line of Independence Day, where the alien death ships slowly but surely positioned themselves over each major city, with the eventual outcome well understood, so too is Intellectual Ventures (I.V.) slowly positioning itself as the patent overlord over many major industry segments. Just like in the movie, the eventual outcome is well understood. To wit: Complete usurpation of the U.S. Patent system. The outcome is a, gigantic tax/toll collector controlling the pulse of innovation in the U.S. or, like the movie, extermination of innovation.

The 30,000 patents, and growing, in the I.V. portfolio have each withstood an average of but 14 hours of scrutiny by the U.S. Patent Office. That’s it; less than 2 business days of total review to issue a property right that, when amassed as I.V. has done, can inflict great pain ($ 1 Billion per) upon an entire industry. But here’s why the Emperor has no clothes: In any collection of patents, bar none, about 95% of the patents reflect the worth of their 14 hours of individual scrutiny. In addition, the Supreme Court, recently, re-wrote the standard of review (KSR V. TeleFlex). In short, these patents are not worth the paper they are printed on. But, owing to the excessive cost and uncertainty to have a second look at these patents either during the course of litigation, or through the Patent Office Reexamination procedures, most victims of this licensing extortion racket meekly pay-up. What Myhrvold has wrought is an obscene abuse of the patent system. It should be stopped, either by industry groups banding together to file reexaminations, or by Congress, or both.

The Patent system has 2 reasons to exist:1) incentive to disclose inventions; and, 2) dissemination of those ideas. In short, great ideas are brought forward and rewarded, and those who follow can build upon them. So, which of these principles does Intellectual Ventures completely undermine? Both. What is the incentive to come forward with a great idea when your only buyer is Intellectual Ventures? What is the possibility of building on those ideas when you’ve got to pay the bill for the other 20,000 (19,500 of which are likely worthless) patent properties at the same time? The answers: Zero and zero.

All of this matters because a patent represents encapsulated ambition. It can be of an individual or a company. But, in either case, it represents everything they have to offer the world expressed as an exclusive right. These efforts and resulting rights should not be corralled and concentrated by a single entity for no purpose other than creating a tax on innovation. No one benefits, except the tax collector. In the I.V. overlord model: Is that tax re-invested like a University would do with their licensing income? Is that tax used to expand markets and create growth as it would for a practicing company? Does it go to an individual to incentivize further innovation? The answers: No. No. And, no.

Congress needs to act; fast. Any politician, including every candidate on every ballot in Novembers to come, believes at least one edge the U.S. has over anyplace else, is our capacity to innovate. Couple of problems there: we’ve put a cork in the Patent Office (over 1 million patent applications are backed up awaiting review); endless and costly litigation procedures without finality (blame both the Court of Appeals for the Federal Circuit and the Supreme Court) kill any market advantage obtained through patenting; and, I.V. and other Trolls are vacuuming away investment into their collective war chests. Innovation is being actively mugged, and all we’re doing is talking, and talking, and talking, and talking. Kinda like what we’ve done with our financial system. The speed and depth of debate with respect to Patent Reform is laughable given the consequences. The debate is factional and shallow and useless. We must return to first principles.

It is well past time to act. The Patent Office needs to be the single arbiter of patent validity and claim meaning. Courts should determine damages and injunctions only. Before any patent is litigated or licensed, it must withstand scrutiny that relates to its worth. It is time to reinvigorate the Patent System. The future of innovation in the U.S. rides on the outcome of these efforts.

EDITORS NOTE: John White, patent attorney and sooth sayer, wrote this article on September 17, 2008, and it was originally published on PatentFools.com. The only edits are to the first sentence, which then referenced a Wall Street Journal story about Nathan Myrvold that appeared below the fold on the 17th of September 2008, and the number of patents owned by IV, which was changed from 20,000 to 30,000.

The Author

John White
is a Director at Soryn IP, a patent advisory and finance firm that, among a host of patent-centric offerings, assists parties in identifying and acquiring patent portfolios that satisfy strategic and business needs. Mr. White is also a US patent attorney and a principal lecturer/author of the PLI Patent Bar Review Course. Since John began teaching patent bar review courses in 1995, he has personally taught nearly 50% of all practicing patent attorneys and patent agents how to successfully become admitted to the Patent Bar. John has also taught numerous US Patent Examiners at the United States Patent & Trademark Office (USPTO) in the “Law and Evidence Course” necessary for them to advance to Partial Negotiation authority as Examiners. John serves as an expert witness in litigations and is regarded as a leading authority on patent practice and procedure. For more information please see his profile page.

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

Discuss this

There are currently 89 Comments comments.

Patentology (Mark Summerfield)December 20, 2010 5:40 pm

‘Sooth sayer’ or ‘Chicken Little’?

The predicted global apocalypse has failed to happen in the period since this article was first published, more than two years ago, and I predict that it will continue to fail to happen.

The patent system does not exist only, or perhaps even mainly, for the two reasons identified in the article. The primary purpose of the system, surely, is to encourage innovation (the modern way of saying ‘Promote the Progress of Science and useful Arts’). Disclosure and dissemination are only one side of the equation. The other is providing a financial incentive, in the form of a limited-term monopoly, to conceive of new ideas, and reduce them to practice, without which there could be no disclosure or dissemination. IV provides one mechanism by which inventors, who perhaps lack the capacity of inclination to commercialise their ideas for themselves, to obtain a return for their efforts, and then perhaps to move on to the next inspiration.

The sky is always just about to fall, but somehow it stays up. Perhaps patent holders and prospective licensees are not, after all, so naive as to think all of those patents are of equal strength and value? And even ‘bad’ patents have the redeeming feature that they eventually expire.

Gene QuinnDecember 20, 2010 7:47 pm

Patentology-

So what do you say about those patent trolls that sue small businesses on dubious patents? That seems to me like conclusive evidence that the sky is starting to fall. Of course, other evidence would be that IV is starting to enforce its patent portfolio, which is something they claimed they would never do.

You see, if you actually look the evidence is all around you.

I’m sure those inventors who have had their patents acquired through bankruptcy proceedings will find it useful to know that they were able to obtain a return for their efforts.

-Gene

ipfanDecember 20, 2010 8:55 pm

Gene- you often refer to patent trolls suing small companies on dubious patents. I agree that it would be a bad thing, but where are all these suits against small companies on dubious patents that you speak of?

Patentology (Mark Summerfield)December 20, 2010 9:26 pm

Gene-

If I actually look, the evidence is inconclusive, and certainly does not support some form of urgent intervention.

Firstly, the ‘troll phenomenon’ is highly technology specific. All of the alleged trolling that attracts attention is in the high-tech space (hardware, software, finance). So we can say for a start that any problem is limited to a specific sector of the patent system, and that a general intervention, which might have unforeseen effects in other sectors, risks doing more harm than good.

Second, not all NPE’s deserve to be labelled ‘trolls’. You carried an article here back in June asking- somewhat facetiously, though with serious intent- whether Thomas Edison was a patent troll. Universities and research institutes (such as Australia’s CSIRO, holder of a patent covering basic Wi-Fi technology) rely on licensing as a means of commercialisation and/or technology transfer. What intervention would you advocate that would not negatively impact on these stakeholders?

It is easy to say that Universities reinvest licensing income in new research, while trolls do not, but is it really that simple? Licensing revenues represent an extremely small proportion of University income. The AUTM licensing survey in 2009 found that total licensing revenues in 2008, across all Universities surveyed, amounted to US$3.4B. I believe that the Federal Science and Technology budget for FY2008 was around US$60B. UC Berkeley alone had total revenues in 2008/09 of US$1.8B, of which 19% was Federal research funding, 18% private funding, and licensing revenue buried somewhere in 15% ‘other’.

Meanwhile, everybody who has capital on-hand invests it in something, all of which promotes some form of economic activity. Calling one company’s stash an ‘investment fund’ and another’s a ‘war chest’ merely begs the question without advancing the discussion.

There is some evidence of increasing NPE activity in the high-tech sector over the last decade. In a paper entitled ‘Of Trolls, Davids, Goliaths, and Kings: Narratives and Evidence in the Litigation of High-Tech Patents’ (available from SSRN at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1396319), Colleen Chien of Santa Clara University School of Law analysed the litigation of high-tech patents, covering hardware, software, and financial inventions, using data from the Stanford Intellectual Property Clearinghouse for cases initiated in U.S. District Courts from January 2000 through March 2008.

Chien found an increase in the number of NPE suits, as a proportion of all suits over this period, of 10% to 20%. This is obviously not insignificant, but says nothing about the quality of the patents involved or the outcomes for the original inventors, and must be seen in the context of the fact that NPE’s business are built around patent licensing and (if necessary) enforcement. More importantly, Chien’s analysis shows that the true situation is much more complex than is usually portrayed.

Looking at other articles here over the past year, it seems that at different times NTP, Acacia, and now IV have all taken turns at being the ‘troll du jour‘. Yet NPE suits remain a minority (albeit a significant one) of those brought within a minority (again no doubt significant) of technologies covered by the patent system.

Your final comment is unworthy of you. As we both know, the majority of new ventures (and inventions) fail, for a very wide variety of reasons, most of which have nothing whatsover to do with patent trolls, real or imagined. I have sympathy for all those who suffer through economic hardship, particularly in these difficult times, but more so for those who lose their homes than their patents.

-Mark

Alan StewartDecember 21, 2010 9:41 am

As I was reading the article I was wondering where the call for Federal or State Anti-Trust action was lurking. I was pleased to see that the solution is not to knock down the company that legitimately and legally acquired these portfolios and is asserting them within the bounds of the current laws. I don’t care for their actions and feel that they are exploitative at best and probably extortionistic at worst. But they are/were legal actions.

I was pleased to see that the call was for real reforms in the manner of enforcing patents and offered a logical and simple approach to the problem. I do have a concern with foisting the validity reevaluation onto the same body that is tasked with the original evaluation. They may have the best skill set to address the questions but there is an inherent bias that is possible when someone comes along later and asks, “did you really mean to issue this patent, because I think you were wrong the first time.” I know much of this currently goes on in the apprals process, the BPAI and in the reexam processes, but I have always been a little concerned about this.

The other concern I have is relates to the settlement of any disagreement over the outcome of the USPTO validity determination. The article would have the USPTO be the determiner of validity. But there must be an appeals process for any deteremination of validity/invalidity, whether under the APA or some other applicable federal act, or under the concern of having the ability to question wrong or arbitrary determinations. Following the line of logic of having the USPTO as the reevaluator, the appellate body should be outside of this agency and also have a particular skillset for the technical work. And this logic leads straight to the CAFC. Just like now, any possible avenue to attack an initial finding of validity/invalidity will wind up on the doorstep in Washington DC of this august group with its piercing clarity of decision. I do not see this as a real improvement on the present system. If the CAFC still performs de novo reviews of the work performed by the new USPTO validity courts, have we improved the system at all?

I like the concept posed by the author but I would like to put more flesh on the bones before I buy into it. The devil, as always, is in the details.

-ars

Ron HiltonDecember 21, 2010 10:47 am

John has hinted at part of the IP reform that I would favor, namely a multi-tiered patent system along the lines proposed by Kristen Osenga. Under her proposal, the highest tier, which involves a much more rigorous examination at a commensurately higher cost, would be required in order to bring an infringement suit. The middle tier would reflect the current level of examination, and the lowest tier would be a very cursory examination that does little more than secure a filing date and weeding out the very poorest quality applications. I’m not sure I agree with John’s proposal to eliminate all judicial recourse as to the validity of a patent. The presumption of validity and the standard of evidence for invalidation is already quite high, probably moreso than justified under the current system. The tiered system would actually help to better justify that presumption of validity.

Gene QuinnDecember 21, 2010 10:48 am

ipfan-

Take a look at the docket for the Eastern District of Texas. That is where these lawsuits are filed. They sue dozens and dozens of defendants in a single action because the Eastern District of Texas willfully misapplies the law of joinder. If a plaintiff sues on the same patent that is enough. Everywhere else the law is that there needs to be a nexus between the facts. There is never any nexus, but the district court judges look the other way. They seem to like keeping patent cases in the District.

-Gene

Barry FarrisDecember 21, 2010 12:01 pm

As a pro se in a recent patent infringement lawsuit, I think that is hilarious that lawyers are complaining about other lawyers doing what they were trained to do, i.e. extract money from others without the use of physical force. As a non-lawyer, it is clear to me that lawyers are both the problem and the solution. The solution to this abuse of process is already available in the various Rules of Federal Procedure. The missing element to this solution is the lack of gonads of the “good” lawyers to sue a “bad” lawyer because “it is hard to prove”. If there is money to be made being a troll there is also money to be made suing them for abusing the American Law and patent systems. From someone just far enough outside the problem to have clarity, I say to the “good” lawyers, “man-up and punish the bad guys regardless of how difficult it might be”.

JoeDecember 21, 2010 12:12 pm

The idea that 98% of issued patents are invalid is absurd. (19,500 out of 20,000). Is the author admitting that 98% of the patents he obtains are invalid and unenforceable? Anyone else admitting that? The many patents I have obtained for clients are fully valid and enforceable, in my opinion, quite frankly.

A patent holding company pays money into the system to spur further innovation by paying the original holder/obtainer of the patent value for their patent. That money goes back into the system and to the innovating entity.

If someone is approached by a patent holding company with an invalid patent, they should get an opinion letter on whether the asserted patent is valid or not. This will be a lot less than paying royalties. If the patent really isn’t worth anything, then the point is moot in the first place.

It is called buying and selling. It is what we do in a free market economy. To have the products of our collective work going out into the market and being bought and sold is good for us and good for our clients. I see no logical argument to the contrary. The fact that some people don’t personally like patent holding companies is not a basis for structurally changing the system.

Finally, the proposed solution seems absurd. How exactly would letting the PTO be the final arbitrer of patent validity solve the supposed problem? Do reexamination proceedings find that many patents invalid? (19,500 out of 20,000 as the author asserts.) There seems to be not one legitimate point made in this whole article.

Gene QuinnDecember 21, 2010 12:45 pm

Joe-

I think you need to read the article more carefully. John isn’t saying that 98% of patents are invalid, he is saying that their value is reflective of the 14 hours of time that the patent examiner spent on the file. Add that together with the Supreme Court changing the law of obviousness to make it quite different and far easier to prove obviousness, and you are left with the reality that most patents acquired prior to the KSR decision can be easily challenged.

You have to remember, there is maybe a total of $4,000 to $5,000 spent searching a invention throughout the patent process. If that innovation becomes valuable and subject to licensing and litigation there will be many millions of dollars spent seeking to find prior art. And there are entities like Article One Partners that facilitate community involvement.

Whether you like it or not, the reality is that thanks to the ignorance of the Supreme Court and thanks to the fact that patent examiners have woefully inadequate sums of time to examine, most patents are likely not worth what they could or should be. Are 98% of them invalid? No, because patents are not valid or invalid. Are 98% of patent claims obtained prior to KSR invalid? Perhaps.

As far as John’s proposal that the USPTO be the final arbiter, that isn’t at all absurd. I’ve written about this for some time. Before a patent gets litigated the Patent Office should have another look now that the claims matter and they can spend more than the 14 hours, which is pitifully inadequate for an patent that will be litigated.

Do reexaminations find that many patents invalid? Asking the question shows you are not familiar with the industry, because the answer is yes. Again, patents are not invalid, claims are. Approximately 95% of claims are lost or amended in an inter partes reexamination and approximately 75% of claims are lost or amended in an ex parte reexamination proceeding.

-Gene

Blind DogmaDecember 21, 2010 1:00 pm

“95% of claims are lost or amended in an inter partes reexamination”

Gene – hyperbole ?

staffDecember 21, 2010 1:17 pm

‘practicing company’

Not all firms, including independent inventors, have the cash to commercialize their inventions. Prior to eBay v Mercexchange, small entities had a viable chance at commercializing. If the defendant was found guilty, an injunction was most always issued. Then the inventor small entity could enjoy the exclusive use of his invention in commercializing it. Unfortunately, injunctions are often no longer available to small entity inventors because of the Supreme Court decision so we have no fair chance to compete with much larger entities who are now free to use our inventions. What hypocrisy! The same parties who complained about injunctions now complain that small entity inventors are not commercializing. If you don’t like it, tell your Congress member. Then maybe we can get some sense back in the patent system with injunctions fully enforceable on all infringers by all inventors, large and small.

Patent reform is a fraud on America.

JoeDecember 21, 2010 1:36 pm

Actually PTO stats show that 12% of re-examed cases have all claims cancelled. So 88% of re-examed patents have valid and enforceable claims. The fact that some were amended doesn’t tell you anything. The amended claims could be stronger than the original. This seems to be the point of dispute. Some people think 98% of US patents (and their claims) are invalid, and some don’t. I find it hard to believe that any experienced, competent, patent attorney would go around arguing that 98% of their patents (and their claims) are invalid. Do you so advise your clients?

I think the problem is that a lot of large companies (like say Microsoft) don’t like dealing with nobodies (like say i4i). They are used to just going around stepping on everybody else’s IP at will. They don’t like getting all these letters from inconsequential organizations asserting their patent claims. (They also don’t like paying for all the opinion letters they then have to get.) Of course, the answer to that is: don’t infringe other people’s patents and you won’t have to worry about it.

Gene QuinnDecember 21, 2010 2:45 pm

Joe-

You are simply incorrect, which makes me wonder where you are getting your information and what your bias is.

According to the USPTO, as of September 30, 2010, in inter partes reexamination only 11% of patents have all claims escape unchanged. 47% of patents have all claims lost, and 42% of patents have claims modified. See:

Also according to the USPTO, as of September 30, 2010, in ex parte reexaminations only 23% of patents have all claims escape unchanged. 12% of patents have all claims lost, and 65% of patents have claims modified. See:

One more thought Joe… obviously you are a neophyte. Do you even know what KSR v. Teleflex is and why after that decision the patents issued prior to it were immediately called into question?

So while it might be hard for you to comprehend the truth about patents having claims that can be easily challenged given a CHANGE in the law by the Supreme Court and the fact that patent applications get a total of about 14 hours of scrutiny. But the fact that you don’t understand doesn’t mean you are right, it just means you don’t understand.

-Gene

Gene QuinnDecember 21, 2010 2:50 pm

BD-

I certainly wasn’t intending hyperbole. If you look at the statistics through September 30, 2010, 89% of inter partes cases have either all or some claims modified. 47% have all claims lost. That is a huge number and one reason I can’t for the life of me understand why it isn’t utilized more. 42% of cases have claims modified. It isn’t too much of a stretch to believe that in those cases it is the broadest claims that are modified, which then would filter down through all of the dependent claims as well, essentially making the claims useless against anyone who had previously started to engage in infringing activities thanks to intervening rights.

See links above.

-Gene

JoeDecember 21, 2010 3:57 pm

Actually I think I am not a neophyte, but thanks for asking. I have to take note how quickly you degenerate into personal attacks.

This is the ex parte reexam stats since 1981. It is as I said. You cited the inter partes reexam stats since 1999. How many cases is that? 192. Obviously, not enough to draw any conclusions on. Inter partes reexam requires a third party of course, is expensive, and is not used much.

Gene QuinnDecember 21, 2010 5:23 pm

Joe-

Actually, you are a neophyte and I just wanted to make sure those who might not be knowledgeable understand that they need to take your lack of experience and knowledge into consideration when gauging the veracity of your comments.

First, calling you a neophyte is not a personal attack, it is a characterization; and one that is correct. You seem unfamiliar with KSR v. Teleflex, which was the central reason John made his statement. I asked you if you were familiar with the case and you haven’t responded, so it seems you are not. KSR v. Teleflex is the single most influential decision of the Supreme Court in decades in the patent space, they fundamentally changed the law of obviousness and have made it far easier to challenge patents. Obviousness is something that touches every patent prosecution and every patent litigation, and the fact that you don’t understand how the changes made by the Supreme Court call into question the integrity of patents obtained prior to the ruling screams neophyte.

Second, you said earlier: “The fact that some were amended doesn’t tell you anything. The amended claims could be stronger than the original. This seems to be the point of dispute.” There is no dispute. Those who believe this are wrong on the law. In reexamination the goal of the challenging party is to either get the claims kicked out or to get the claims modified. If a claim gets modified it is as good as having the claim kicked out. A modified claim cannot be asserted against anyone who previously started engaging in what would otherwise be infringing activity. So the modified claims cannot be used to stop ongoing infringement. This is what is referred to as intervening rights. The fact that you don’t know this also screams neophyte. Claims that are modified in reexamination are not only not stronger, they are useless to stop ongoing infringement.

Third, while it is not a personal attack to notice you are a neophyte, it is a personal attack for one to question the competence of an attorney, which is what you have done. You engage in personal attacks and then claim that a fair representation of your understanding is a personal attack. Please! Can we keep it honest? You have repeatedly said that what I am saying and what John wrote is absurd and that no competent and experience patent attorney would hold these beliefs or say these things. Not only are these personal attacks, but they miss the point that everyone in the industry knows what we are saying to be true.

Fourth, you made up reexamination statistics to make your argument. I proved that your statistics were fabricated. You claim that 88% of reexamined patents have valid and enforceable claims. That is simply not true. For inter partes reexamination only 11% survive with useful claims and for ex parte reexamination only 23% survive with useful claims. Your failure to understand the legal significance of modifying a claim in reexamination is your problem. I called you on this, provided proof that I was correct, have explained the situation multiple times now, and all you can come up with is that the sample is too small? Well the small sample proves I am right and your statistics were incorrect. Your failure to acknowledge that you were wrong suggests you are insecure in your knowledge of the subject matter.

Finally, you provide a link to show me something, presumably that I am incorrect. You didn’t even notice that the link you provided was the same link I provided. It does not support your position and conclusively proves I am correct.

-Gene

john whiteDecember 21, 2010 5:24 pm

I’d only use the most recent stats post KSR. I can assure you, as a participant on both sides, interparte reexam is a tough row to hoe. The overarching point I am making is this: what proportion of patents are litigated or licensed. Not many, tops 5%. Of those, how many are determined to be invalid: a significant fraction. Hence, you quickly get to the high 90’s as a percent of patents that are not licensed/enforced/ are found invalid. Why should IV’s patent portfolio be any different? Given that it contains as many patents as it does, it probably reflects the averages of worth I have mentioned. Their model is to reduce all patents in their portfoio to the lowest denominator. That is fine for them, they have big numbers and big leverage. Not all players have that leverage but none-the-less have their values written down to that same level. That undermines incentive all around.
As to validity/infringement: the scope of a claim shouldn’t change over time. That which, if later, infringes, if earlier invalidates. It is the same inquiry and should be done by the same staff to the same standard, but with resources adequate to the task. The specs I have been seeing lately in the bio-informatics area run to 700 – 800 pages. 50-70 sheets of drawings. It is not possible to review these, search, and prosecute in the time provided. Simply not possible. The quality of the patent reflects this reality. This reality must change.

Gene QuinnDecember 21, 2010 5:39 pm

Patentology-

I disagree that the evidence is inconclusive on the need for urgent intervention. I grant that virtually everything you write is correct and I agree with you, but the reality is that there are a growing number of bad actors that are suing small businesses, those with $5 million in annual sales or less, for patent infringement. They acquire a patent and their complaint says that the defendant is engaged in the line of business covered by the title of the patent. Then they attempt to shake these businesses down because they want to pay a license fee rather than fight. They cannot afford to fight a patent infringement suit. If you look at the claims of the patents and look at what the defendants do, there is no good faith basis for any allegation of infringement. So no due diligence.

This crap is allowed to happen primarily in the Eastern District of Texas, where dozens and dozens of defendants are sued in a single action. The ED of TX says if it is the same patent it can be the same case, which is not the law. They twist the law to keep defendants in the lawsuit when in every other district the court would order the cases severed because there is no connection between the facts of the case. So something desperately needs to be done with respect to the Eastern District of Texas. The big companies complain, and sometimes they have a right to complain, but they lose a lot, so they are infringers it turns out. The small businesses are being extorted, and that is having a negative effect on innovation.

I have never lumped all NPEs together. I ask whether Thomas Edison would be a troll, Universities, independent inventors, R&D companies to show the absurdity of allowing those who want to water down patent rights and vilify the innovator that the use of NPE is altogether unacceptable. It sanitizes the issue and lets them lump all NPEs together, when in fact the overwhelming majority of NPEs are doing what innovators have always done — they innovate and play by the rules. The bad actors are the ones who acquire a patent and then sue regardless of whether there is infringement. To do no due diligence and engage in extortion tactics that seem authorized by the bending of the law by the judges in the Eastern District of Texas. So the term patent troll needs to be used, in my opinion, 100% of the time. No one in their right mind would call Thomas Edison a patent troll, or a University or an R&D company. So they shouldn’t be treated as such and any attempt to address the bad actors needs to address them and not sweep everyone else up.

As for my last comment, I just said that because your statement about benefit to inventors and innovators was far too sweeping. You know that a lot of these bad actors buy patents that way and calling that a benefit to them is not correct. It is all about putting your finger on who the bad actors are.

As for me calling Paul Allen or IV a patent troll… if it walks like a duck and quacks like a duck the odds are that it is a duck. So as long as they seem to engage in the same extortion tactics with crap complaints that are non-informing and evidence no due diligence then they need to be characterized among the ducks. If they step forward and engage in appropriate civil lawsuits without shifting the burden then it would seem they would not be trolls, although IV has certainly lied for years about what seems to be their true intentions.

-Gene

John L. RiesDecember 21, 2010 5:56 pm

“The Patent Office needs to be the single arbiter of patent validity and claim meaning.”.

I’m not convinced of that, especially given the huge number of very dubious patents that have been issued by the USPTO in recent years. Besides, under the U.S. Constitution, it’s the job of the courts to arbitrate disputes regarding proper interpretation of the law, not the President, and not the civil servants who work under his direction (which would include the USPTO). Indeed, I think it should be easier for juries to overturn patents, not harder.

What can and should be done is to raise the application fees substantially so that the USPTO can afford to spend more time examining patent claims, require that all money collected by the USPTO be used to fund its operations, and substantially tighten procedures to insure that patents are only granted for specific, substantial inventions (described in sufficient detail in the application that they can be easily reproduced) that represent real advances in the state of the art, and that the traditional bar against patenting mathematical algorithms is restored.

Three things that might also help:

1. Impose a surcharge on frequent patent applications by the same person (perhaps more than one per year). Even the most productive inventors are unlikely to come up with more than one substantial invention every five years or so and this would serve to discourage the sorts of trivial patents trolls and large corporations like to claim, as well as provide additional funding for the USPTO.

2. Impose prison terms and/or large fines for falsifying a patent application (including the identity if the alleged inventor) or deliberately omitting relevant data that might cause the patent to not be granted. If such laws already exist, then the DOJ needs to enforce them.

But what about attorney time put into these cases? Any competent attorney should well be drafting and prosecuting to have a valid and enforceable patent issued–completely independent of what the Examiner does or doesn’t do. That would make it a lot more than 14 hours being put into any given case.

The i4i case shows that a little guy can take their patent, rise up, smack MS, and score a big win. It happens. I know some don’t like all the threatening letters they are receiving, but I think the case has not been made out for Congressional action to fundamentally change the patent system. There are plenty of recent examples of people asserting their patents, the patents being found valid, and winning. Yes we would all like to see better examination, but the idea that virtually all US patents are invalid and worthless, should not be the starting point for major action by the Congress.

I think these holding companies are like head hunters in a sense. A lot of people don’t like them, but yet they are out there doing what they do, and as long as they play by the rules, the reality is that there is really no fair complaint against them.

Gene QuinnDecember 21, 2010 6:56 pm

Joe-

What about attorney time? You do realize that 98% of patents are not commercially relevant, correct? That means it makes no sense to do a no-stone-unturned search. So the patent examiner spends some time and the patent attorney spends some time. The patent examiner could and probably should spend more time, but in their infinite lack of wisdom the Congress refuses to adequately fund the Patent Office. Attorney time is dictated by the client. It will probably come as a shock to you, but clients separate patents into roughly 3 categories. Category A are the crown jewels, Category B are things that could be important and Category C are things that might be nice to try and get at least some protection on. So they spend little or nothing to protect Category C inventions, and they get what they pay for, not much. Category A patents on the other hand are exceptionally high quality because they pay for adequate attorney time. Pretending that every patent is a Category A patent is ridiculous. It is not the real world.

So stop with the “any competent patent attorney” crap. You don’t understand the industry and you don’t understand the practice. Inventors and companies get what they pay for. Noticing that between that reality, the fact that the Supreme Court changed the law and patent examiners are not given enough time to examine it is hardly a shock that when put to the test the overwhelming number of issued patents likely couldn’t stand litigation level, or reexamination level, scrutiny.

So the moral of the story is that those who have real innovations need to take real steps to protect them. There are thousands of small and mid-size companies that do exactly the right thing. The truth is that these small to mid-size companies typically have better patent portfolios because they treat their innovations like Category A innovations, because without meaningful protection they can’t get investors and they couldn’t even contemplate competing with the Mega Giants of the industry.

-Gene

JoeDecember 21, 2010 7:31 pm

Gene-

I wasn’t talking to you.

The bottom line is that I think that what is going on here is that we have a lot of big co.’s who are very unhappy with the current state of affairs. They are increasingly being sued on patents that they previously didn’t have to worry about because the owners didn’t have the money. If the owners did say anything they would immediately be met with a harsh response by the co. and a team of lawyers. I am guessing that the author was probably gamely trying to represent the interests of these well heeled clients (who have probably paid him a lot of money over the years!) and there is nothing wrong in that.

But just because these companies are now being held to account for all the IP they are stepping on is no reason to change the system. If they don’t like getting sued, maybe they shouldn’t infringe other people’s patents! I’m not trying to be black or white about it, but I think that is alot of what is going on here.

As for your comments about the different categories of patents, I guess I only get the category A cases. Best of luck with those category B and C applications!

Ron HiltonDecember 21, 2010 8:16 pm

Gene,

Thank you for making my case for a multi-tier patent system. You are absolutely correct that “category A/B/C” represents the reality of the situation, whether it’s the result of a formal corporate invention disclosure evaluation process, or simply a function of how much an individual inventor is able or willing to spend. By reflecting that reality in the patent system with explicit A/B/C tiers, where only A’s are enforceable, the troll problem that you describe would be greatly reduced. BTW, I should add that Osenga’s proposal also allows for promotion from one tier to the next by meeting the appropriate requirements and paying the correspondingly higher fees (significantly higher, in the case of tier A).

Gene QuinnDecember 21, 2010 9:34 pm

Joe-

Of course you were talking to me. Can’t you see our dialogue? Do you think others won’t notice us having gone back and forth and you directly commenting to me and me directly commenting back to you, and so on? You are a real character!

Did I say that I do Category B and C applications? Are you always so arrogant and presumptuous? You are proven wrong, still won’t admit it and then want to pretend that someone who is unfamiliar with basic patent laws is not knowledgeable because they get A work. LOL. Are you a comedian in real life?

God help your clients if you really are a patent attorney. A patent attorney that doesn’t understand the industry, isn’t familiar with KSR and doesn’t know basic reexamination fundamentals is a scary thing.

Who are you trying to kid? It is clear you are not a patent attorney, but rather are a business person who thinks you know everything there is to know about a patent and how the process works.

Cheers! 🙂

-Gene

Patentology (Mark Summerfield)December 21, 2010 11:19 pm

Gene-

If you are, in fact, arguing for the courts (especially in the ED of TX) to be better gatekeepers, then I would not dispute that. If cases are being accepted that do not accord with the law, or that are inadequately pleaded, then something should certainly be done about it.

However, this is not what is being advocated in John White’s original article, with which I cannot agree, for the reasons I have already presented.

-Mark

PS You and Joe may have diametrically-opposed opinions on this issue, to which you are both entitled. But reading his comments as a somewhat less invested participant, I find it hard to see any solid basis for some of the more personal criticisms you have leveled at him. Fortunately, he seems to have a pretty thick skin!

Renee C. QuinnDecember 22, 2010 8:40 am

Comment from Gene follows—

Patentology-

Please identify personal criticisms I have leveled against Joe. Noticing that he is a neophyte is not a criticism. It is correct. He is the one who has leveled the criticism. Why do you call me out and ignore the fact that it IS a criticism to repeatedly question someone’s competence?

I’m sure you realize that he has been wrong from the start. Is noticing that what he is saying is incorrect, not based on fact and misunderstands the law a personal criticism in your view?

He has engaged in back handed assaults and has never acknowledged he is wrong. It is a shame to see you come to his defense when he has been the one engaging in the personal attacks.

-Gene (using Renee’s computer to comment)

Patentology (Mark Summerfield)December 23, 2010 1:32 am

Gene-

OK, I’ll bite. Somewhat against my better judgement, but I am a great believer in the value of civility and objectivity.

For the record, I do not entirely agree with either you or Joe. The problem I have with using any re-exam stats for present purposes is that, by definition, a patent that is re-examinined is one that somebody thinks is wholly or partially invalid, or commercially important, or possibly both. Furthermore, re-exam only proceeds in cases where the USPTO is persuaded that there is a Substantial New Question, and my own experience suggests that this is getting much harder to do.

The outcomes in re-examinations, however you interpret them, and whatever period you look at, are inherently biased, and without statistical merit as a basis for talking about all of the patents that have not been re-examined.

Joe has made the point that the relatively small number of inter partes cases is not statistically significant. This is probably true. You and Joe actually agree that the proportion of ex parte cases that are actually found wholly invalid is only 12%. You have different opinions on what to make of the cases in which some claims are found invalid and/or amended. Of course this depends, on a case-by-case basis, on exactly what cancellations and/or amendments take place. So I think you both have a point here, and are entitled to your views.

You and John White have suggested that only post-KSR cases should be considered. I understand what you are getting at here, and I imagine that Joe does, too. The problem is that the jury is still out on this. Clearly some patents have been invalidated under the broader obviousness test, while others have been upheld (in litigation and in re-exam). But in all cases, both parties presumbly had advice on the impact of KSR, and felt that they had a sufficiently strong case to take it all the way. I do not think that anyone has presented any actual evidence of the true proportion of issued patents that became invalid overnight when SCOTUS ruled on KSR. Again, this is a point on which you and Joe appear to have adopted opposing positions, which is fine — you are both entitled to your opinions.

So to get to the main point, my reading of the exchange is that the name-calling started when you called Joe a neophyte (which is just a high-falutin’ way of calling him a newbie). You assert that this is not a ‘personal criticism’ because he is a neophyte. He says he is not. I see no reason not to believe him. But you came back and effectively said ‘oh yes you are, and this is why I say people should ignore your opinion.’

You subsequently went on to accuse Joe of being either an incompetent attorney, or not an attorney at all (even though his comments clearly indicate that he is, so perhaps you are calling him a liar).

I think that the whole discussion went off the rails early on, when Joe said ‘I find it hard to believe that any experienced, competent, patent attorney would go around arguing that 98% of their patents (and their claims) are invalid. Do you so advise your clients?‘ You seem to have taken this as a personal insult, which set the tone for your reply, and everything that followed. I read this (and some similar formulations later, that you also took exception to) as simple rhetoric. I am sure that none of us advise our clients that most of the patents we have obtained for them are probably invalid, and so I agree with Joe. He was merely making his point through the form of a rhetorical question, assuming the answer to be ‘no, of course not’. That seems to be an aspect of his writing style. I think that you simply, and unfortunately, took it the wrong way.

Bear in mind that I am reading the exchange as a relatively objective observer, so I cannot speak to how you might react emotionally to someone challenging your opinions. But you set the tone here, and I would hate to see useful discussions degenerate to the Patently-O level of idiocy!

-Mark

Gene QuinnDecember 23, 2010 1:38 pm

Mark-

Respectfully, we are going to have to agree to disagree I’m afraid.

First, you say that there is a point to be made about the value of claims modified in reexamination. What you say is technically correct, but it comes in defense of an argument that is flat out wrong. Joe said that claims that are modified in reexamination are stronger. That is simply not true with respect to past infringement. Claims that are modified cannot be used against anyone who has already started to engage in what would have otherwise been infringing activity. That is the law, whether we like it or not.

Second, the small number of inter partes cases is fine to point out, but that was pointed out to derail my argument. It is funny, however, that prior to me proving I was correct the small number of cases didn’t matter. So rather than acknowledge I was correct Joe simply shifted the debate. Obviously, the small number of cases being statistically irrelevant SHOULD have had implication for his point, but it only became relevant once Joe was demonstrated to be wrong.

Third, you say that John White and I have suggested only looking at post-KSR cases. That is simply not true. Point out one place where I suggested that. You can’t. John did suggest that, however.

Fourth, you say that my calling Joe a neophyte is name calling. That is really absurd. It is an observation regarding his level of understanding. Having said a number of things that are factually and legally incorrect that seemed like a valid characterization.

Fifth, you say that I started the name calling when I called Joe a neophyte. Again, not true. I hate to rely on facts to make arguments, I know that facts get in the way of an otherwise good argument, but let me point out the truth.

Comment 13— Joe says: “I find it hard to believe that any experienced, competent, patent attorney would go around arguing…”

It is not until Comment 15 that I called Joe a neophyte. Since 13 comes before 15, it is clear that any name calling started with Joe questioning my competence and the competence of John White. You see, Joe’s comment about competence is a backhanded, annoyingly arrogant way of saying that John and I are incompetent. So you might not like how I have responded to Joe, but I responded in kind. Joe has demonstrated his lack of understanding of the law, and that he is unjustifiably arrogant. On top of that, the fact remains that calling someone a neophyte is not the same as calling someone incompetent. My calling Joe a neophyte is a characterization that seems correct based on the facts. Joe calling John and I incompetent is NOT justified based on the facts.

Whether you advise your clients that patents acquired prior to KSR likely contain invalid claims and/or are substantially easier to challenge doesn’t change the reality that patents acquired prior to KSR likely do have invalid claims and absolutely will be substantially easier to challenge. So the fact that you and Joe choose to hide that reality from your clients doesn’t change the reality. It is not to say that anyone did anything wrong acquiring those patents, no one could have assumed that the Supreme Court would change the law to be about “common sense” which violates the written language of 103(a) and takes us back to essentially a flash of creative genius test. But to ignore that the Supreme Court’s decision in KSR certainly renders category C patents and many if not most category B patents and some category A patents seems naive to me, and akin to refusing to notice when the emperor is not wearing any clothes. I believe we do a disservice to our clients and a disservice to the patent system when we refuse to notice that the emperor is naked, we do a bigger disservice to our clients (in my opinion) when we fail to counsel them appropriately about the importance of major decisions and how they affect their patents or portfolios. We all know there are things that can be done to prop up some patents that might otherwise be compromised, but not explaining the reality to clients effectively prevents the development of strategies that if implemented would minimize damage.

Finally, returning to where the discussion went sideways… everyone should realize that neither John nor I were “arguing” that 98% of the patent claims we obtained for clients prior to KSR are invalid. The only way one could come to that belief is by a careless reading of the article and comments. Joe was able to make this comment only through a lack of understanding or a willful manipulation of what was actually said. No one is running around “arguing” that, as certain other anti-patent attorneys do on their blogs. What we are doing is explaining the reality of what KSR means, particularly in light of the fact that patent examiners get only 14 or 15 hours to examine an entire application. So while the incompetence implication is insulting, the willful twisting of what was being said is unacceptable. I called Joe on it, demonstrated that he was incorrect on the facts and the law, asked him if he was familiar with KSR (which he never answered) and then he continued to try and shift the debate. It became a moving target, further lending evidence to the fact that he either doesn’t understand the issues or was only ever interested in twisting what was said.

FWIW, I prefer to see a discussion of issues and ideas rather the personal characteristics of the interlocutors. Let the ideas stand or fall on their own merits and not the qualifications and experience or lack thereof of the speaker. Sometimes “dumb” questions are the best. Remember it was the little boy who noted the Emporer’s state of undress.

Gene QuinnDecember 23, 2010 5:15 pm

Mark-

In the words of the Internet generation — OMG! That is perfect!

Cheers, and happy holidays!

-Gene

QuestionforPatentsDecember 24, 2010 10:28 pm

Does the American government run the patent system any more effectively than they run the postal service and DMV?

If the system created by Myhrvold is terrible for invention and innovation, federal regulators can break up his company.

Invention and innovation require experimentation, and this is exactly what IV is doing: an experiment with the patent system. Without experimentation, progress stands still.

Where is Myhrvold on the scale of White Knight Criminal mastermind?

I evaluate him as a polymath that is a good role model for children (minus the slight obesity).

Green light for IV.

Ron HiltonDecember 26, 2010 10:05 pm

I don’t know that a breakup of IV would be the most effective remedy, but I agree that an antitrust action is probably the only legal tool available to deal with the potential problem, if indeed IV’s actions threaten the free market. Probably some type of compulsory licensing on reasonable terms would be more appropriate. However, let me repeat the key points I have already made:

1. Most of the time, the patent system and the free market work just fine in promoting innovation and prosperity. Statutory compulsory licensing would probably be unworkable and cause more harm than good.

2. Better parity between IP law and competition law is needed in order to more effectively deal with the rare exceptions to the norm.

Another lesson from IV and “trolls” in general is that inventors under the US patent system wield more power than they realize. They routinely sign their rights away to corporations as part of the typical employment agreement. If they would band together, engineering professionals could negotiate much better terms for their inventive work. Right now they typically get a small cash award and a plaque on the wall IP that would be worth far more on the open market.

BobbyDecember 27, 2010 7:40 am

“Most of the time, the patent system and the free market work just fine in promoting innovation and prosperity”
That strikes me as odd. The economic justification for the patent system is the assumption that the free market doesn’t ‘work just fine.’ In modern economic terms, patents exist to fix the externalities associated with R&D costs. They are in direct opposition to normal market forces, and saying that they are needed means acknowledging inefficiencies in free markets.

Blind DogmaDecember 27, 2010 11:21 am

“The economic justification for the patent system is the assumption that the free market doesn’t ‘work just fine.’”

No, that is simply not true. Bobby, you are once again seeing things through the filter of your dogma. We have had the discussion previously of “promote” – and the “extra” reading into that term driven by those with agendas. There is nothing inherent in the word to dictate some sort of market failure, or application of the patent system in order to correct any type of failure.

Your understanding will continue to be flawed, because you desire to see what you want to see.

Ron HiltonDecember 27, 2010 12:27 pm

The free market, much like political freedom, depends on checks and balances to function properly. There is in fact an inherent conflict between individual property rights and healthy competition which places that property at risk for economic gain. It’s not that democracy or capitalism are morally superior to socialism. Rather, it’s the fact that they recognize the self-interested aspect of human nature and channel it in a productive direction, thereby achieving greater pragmatic success than a more “idealistic” alternative. Free enterprise, like democracy, is not perfect. It’s just better than all of the other systems that have been tried.

BobbyDecember 27, 2010 12:31 pm

@BD
Okay, then what is the economic justification of the patent system? In what way would a patent system benefit society?

If market forces already deliver socially optimal levels of investment in research, there is no need to have patents, and any change to said system patents would bring would be less socially desirable (if the changes were more socially desirable, then what market forces deliver is not socially optimal).

Blind DogmaDecember 27, 2010 12:43 pm

Bobby – you insist on looking at the situation with the wrong lenses. The problem is in your statement of the problem.

Ron HiltonDecember 27, 2010 12:58 pm

The patent system balances the self interest of the inventor against the self interest of the competitor who might otherwise use the IP without bearing the cost of developing it, thereby gaining an unfair competitive advantage. The free market involves a delicate balance of opposing self interests. Goverment regulation should be directed toward maintaining that balance, not in attempting to dictate socially desirable outcomes. The goal may be the same, but history has shown that dictatorship simply doesn’t work.

BobbyDecember 27, 2010 2:28 pm

@BD
If I am, then explain in economic terms what the justification of the patent system for society.

@Ron
“might otherwise use the IP without bearing the cost of developing it, thereby gaining an unfair competitive advantage”
This is known as an externality. Government regulation is often used to fix externalities, such as air pollution (in an unregulated market, the polluter generally doesn’t bear the full cost of the pollution, giving incentives that are not socially desirable).
“Goverment regulation should be directed toward maintaining that balance, not in attempting to dictate socially desirable outcomes.”
I agree that a government trying to over regulate can be problematic, but the patent system itself is at least supposed to be a government regulation that is taken for society’s best interest.

Gene QuinnDecember 27, 2010 3:04 pm

Bobby-

Are you really asking how society benefits from a patent system? You have been here for how many months, we go over and over and over this, and you still don’t understand?

Is it that whenever we provide proof you just say “correlation not causation” and then ignore the obvious. Do you think that a single pharmaceutical company would invest hundreds of millions a year (if not billions a year), year after year if they couldn’t recoup their investment? Do you not think that cheap generic drugs are a benefit to society? You do realize that there would be NO generic drugs without patents, right? The generic manufacturers are generic manufacturers because they do not innovate themselves, they merely copy drugs off patent so they don’t have to go through the FDA process.

Please, if you are going to make a point go and make the point, but don’t ask silly questions to which you know or should know the answer.

-Gene

Barry FarrisDecember 27, 2010 3:13 pm

Gene, Why are you arguing with folks who love to argue rather than solve a problem? You cannot teach those who are unteachable.

BobbyDecember 27, 2010 3:55 pm

@Gene
I gave an economic explanation, but BD rejected that explanation, so I am asking for another. I’m not even asking for him to prove it works in reality, just a theoretical reason for society to have patents.

You seem to be backing up the theory I was proposing, which was that relative to normal market forces, patents produce results that are more socially desirable, better, preferable, or whatever word you wish to choose for the relationship between the market with and without patents. Whether or not this pans out in reality is a different issue, but this is the logic behind our patent system.

Also, the claim that “You do realize that there would be NO generic drugs without patents, right?” is completely untrue. There were many drugs that were developed without patents, and assuming that private corporations aren’t significantly most efficient at running clinical trials than the private sector, the current amount of NIH investment alone would result in somewhere between a third and three quarters of the drugs we have today with no other changes, depending on your source. Also, there are enough differences with pharmaceuticals that it’s almost a completely different argument for patents in other fields. As I’ve said before, Milton Friedman isn’t a big fan of patents, but he sees them okay for pharmaceuticals because of the high costs the FDA brings. It seems strong proponents of patents rely on the area most tipped in their favor to justify patents across the board, even though the equation is clearly very different elsewhere.

Blind DogmaDecember 27, 2010 6:06 pm

Bobby,

Do you understand my post at 40. above?

Gene QuinnDecember 27, 2010 9:59 pm

Bobby-

“There were many drugs that were developed without patents…”

Please name a single drug that has ever gone through the FDA process and made it to market without being patented or having some other form of statutory exclusive right provided to the creator.

Riddle me this… if the NIH is so great and their funding capable of creating 3/4 of the drugs we have today, then why don’t we have 1.75 times the number of drugs we have today?

What you seem to be getting at, however, is that there shouldn’t be a one size fits all patent system. If that is where you are going then I agree. I think biotech and pharma innovations, along with some electrical (mostly related to power) innovations probably deserve far longer than the 20 year term, while other innovations probably don’t require that long. Of course, everyone would want to cut down on the patent term rather than adjust up where it is absolutely required to meaningfully recoup capital investment and have a suitable rate of return. The other problem is the Patent Office is so horribly behind that if you cut term in some areas then there would be no reason to seek a patent because the term would be used up, or much of it, by the time a patent ever issued. So when considering how to do things properly we need to consider that reality will get in the way.

-Gene

Gene QuinnDecember 27, 2010 10:02 pm

Barry-

You are probably right, but it is my philosophy that believers cannot give an inch. Those who would rather have the patent system destroyed continue to win the PR battle, and that is critical because it influences those non-thinkers in Congress who do have the power. I think everyone who notices the half-truths and outright inaccuracies must set the record straight if we are going to prevail.

For the record, while Bobby and I almost always disagree, I don’t know I would call him unteachable. Entrenched is probably a better description. At least he engages, and as he did above he does give around the edges. I know I go at it hard with Bobby, and he gives it back, but unlike so many he does interject facts into the debates.

Cheers.

-Gene

Ron HiltonDecember 28, 2010 2:12 am

Speaking as one who has personally benefited to some extent from the patent system as an inventor and entreprenuer, but who also has been significantly harmed by what I consider to have been abuses of the patent system, I still have to say that on balance I firmly believe that the patent system is vital to promoting innovation and economic prosperity for society as a whole. As an inventor I might reluctantly be willing to forego the benefits of patent protection if I had adequate resources to launch a venture with all of the necessary elements “in-house” to avoid public disclosure prior to product launch, to at least gain a “head-start” on the competition. But like most inventors, I have very limited resources, and need to disclose my ideas to potential investors, partners, and customers at a very early stage. In particular, investors are very reluctant to put up money for R&D without some assurance that competitors will not easily be able to rip off the results of their investment. Big investors and big corporations alike tend to be more interested in conservatively growing what they have, and are not as motivated as the small, hungry entreprenuer/inventor to innovate and commercialize those innovations. Without the patent system, many innovations would never see the light of day, either because the inventor lacked the resources, or the inventor’s employer lacked the vision and motivation to allocate the resources to it.

BobbyDecember 28, 2010 7:18 am

The polio vaccine, largely regarded as one of the most important medical breakthroughs of the 20th century, did not receive a patent. Jonas Salk famously said when asked about who held the patent “No one. Could you patent the sun?”

“if the NIH is so great and their funding capable of creating 3/4 of the drugs we have today, then why don’t we have 1.75 times the number of drugs we have today?”
That doesn’t even make sense. From what I can tell, the amount of funding has almost a 1:1 correlation with how many drugs we get. Somewhere around half of the funding that goes into US pharmaceutical research comes from the NIH, so the NIH play around half the role in getting drugs to the market. About a billion dollars can get us an FDA approved drug, regardless of the source. The latest numbers I have on hand are 2006, where NIH funding was around $57 billion. Given our current formula, that would mean the NIH could have produced roughly 57 patent free pharmaceuticals with that year’s funding alone. In practice, what we get is that NIH funds a portion of most drugs, and private companies generally takes up part of the remainder and gets a patent, resulting in more drugs than NIH funding alone would produce, but with virtually all of them having patents. Just comparing which is preferable between the value of say half of the drugs widely available immediately versus the value of our current amount of drugs less widely available for several years is something one could reasonably debate over, and that’s before the perverse incentives kick in.

There are also some concerns with the incentives patents have in the pharmaceutical industry. One of the biggest is a sort of planned obsolescence. Claritin was produced by Schering-Plough. Around the time the patent covering Claritin expired, Clarinex hit the market. I’m not a biochemist, but I do know that Clarinex was essentially the same drug, and that even if Clarinex was really better, it’s a change that probably could have been discovered in early research stages, meaning that the greater part of a billion dollars was wasted on chemically redundant research that was motivated by the patent system. The same probably applies to the heat stable version of Norvir.

Another problem with pharmaceuticals is that we end up spending a lot of money on ‘low priority’ medically redundant drugs because the market is economically worth tapping, but they can’t directly compete. Bringing up Claritin again. It was considered a low priority drug since Seldane was already on the market and had roughly the same effect. From society’s viewpoint, there was no point in getting Claritin to the market. However, the antihistamine market is quite large and has a lot of potential for profit, so they pushed through two drugs with little social benefit, wasting a lot of time and roughly two billion dollars (since they developed two redundant drugs).

This is not even considering the problems of pharmaceutical companies pressuring doctors to promote certain drugs even when not needed or the best choice, which is sort of a pharmaceutical equivalent to Payola. The problems mentioned are of great importance to our welfare, and properly addressing them is one of the biggest concerns with pharmaceuticals and patents.

@Ron
One thing that often doesn’t go into consideration is that adequate thought is not given to what things would actually be like without patents. The conventional knowledge is that the IBMs and Microsofts would simply take the ideas of the small innovators and overpower them. However, it’s worth noting that by virtue of big companies having more patents, small firms are kept at a competitive disadvantage. Consider the following example:
Let’s say you have a firm, Acme, that is competing directly with IBM. Let’s say that the patents that both firms have are of equal value and equally tough to avoid, and that IBM has 100 times as much money as Acme and 10 times as many patents. That means that per $, Acme is 10 times more efficient at innovating. However, Acme has to avoid 10 times as many useful patents as IBM, which means it costs Acme 10 times more to work around the patents here than IBM. Relative to the resources they have, that means Acme has to spend 1000 times as much to avoid their competitors patents. This is a much larger disadvantage than the 100:1 disadvantage Acme already had, and largely negates the technical advantages Acme has as being a nimble competitor that can adapt faster than a behemoth. Patent reform can help make this less of a problem, but short of discriminating based on who the patent holder is, the ratio in reality is going to be roughly the same (and probably even less favorable than my example).

Another thing worth considering is that without patents, the giants would likely not be so gigantic, making them less capable of bullying small firms. Also, since effectively restricting the utilization of ideas would be difficult, the way big firms would have to maintain their dominance would be like Wal-Mart and their ruthless efficiency to cut prices as opposed to say De Beers and their manipulation of the diamond supply to inflate prices. Both have their downsides, but low prices and a large supply is generally preferable to high prices and a limited supply. In IT, Google is probably the firm closest to being widely called a monopolist that doesn’t rely heavily on IP, they are arguably an example of ruthless efficiency, and they have less of an iron grip on their market than Microsoft and IBM.

Gene QuinnDecember 28, 2010 1:29 pm

Bobby-

You don’t think my NIH comment makes sense? Then does your underlying proclamation that without patents we would still get 75% of the drugs due to NIH spending not make sense either? If NIH can produce 75% of the drugs we have today, which we both know they can’t, but assuming arguendo that should mean that the 75% they create plus the 100% that private companies take to market should create 175% of what we have today. So where is that additional 75%, that’s all I’m asking you.

The fact that the polio vaccine didn’t have a patent hardly proves your case. So let me get this straight, you would prefer to rely on the benevolence of individuals and take far less than we could get with market forces and the recognition of rights? You also ignore the cost involved. If you don’t allow for rights then you are forever relegated to cheap innovations that require little or no funding to create. Sure, some of them will be revolutionary, but not nearly as many as now. The fact that you and so many others fail to factor in is the cost of innovating. Innovation doesn’t just happen, it requires investment. Without exclusive rights no one would in their right mind spend hundreds of millions of dollars on a speculative product that may never make a dime. Why is that simple economic truth so difficult to understand?

If you want to rail on the bad of the pharmaceutical companies then go for it. The pressuring doctors is absurd, I won’t defend that. But I will point out that due to international treaties and countries taking patent rights for life saving drugs, we have fallen into a rut where the big pharma companies are spending so many of their resources on creating lifestyle drugs that are not life saving because they pay the most and TRIPS won’t let countries ignore the patent rights. So you get what you incentivize. But let’s not throw the baby out with the bath water. Because pharma companies employ questionable business practices doesn’t mean we should rip up the patent system. It means we should keep what works (i.e., the patent system) and either give incentives to plaintiffs attorneys to clean up the bad actions or actually have our government officials clean up the seedy side of the business.

-Gene

BobbyDecember 28, 2010 2:46 pm

Gene
“The fact that the polio vaccine didn’t have a patent hardly proves your case”
You asked for one drug that got through the FDA without patents. I provided one drug. It happened to be a very important drug.

“If NIH can produce 75% of the drugs we have today, which we both know they can’t, but assuming arguendo that should mean that the 75% they create plus the 100% that private companies take to market should create 175% of what we have today.”
Okay, let me explain it again. Roughly a billion dollars in R&D and clinical trials results in an FDA approved drug. Since clinical trials are pretty mundane and make up the bulk of the cost, It doesn’t really matter whether that money comes from the federal government, from the pharmaceutical industry, from the March of Dimes, Darth Vader, or Mickey Mouse. In 2006, the NIH gave out $57 to research. If the NIH used this money to go through the complete process of discovery and FDA approval by itself, we would have produced roughly 57 drugs that year, even if the private sector cut all funding. The NIH did over half the funding that year, so we probably still have over half of the drugs no matter what. There is no 175% because the worst case scenario I’m talking about (complete withdrawal of pharmaceutical company funding) is cutting the funding 100% to somewhere between 33% and 75%. In case you aren’t getting my message clearly, I’m saying that the pharmaceutical industry is only responsible for 67% to 25% of the work.

“If you want to rail on the bad of the pharmaceutical companies then go for it. ”
It wasn’t just a generic rant against the pharmaceutical companies. The problems mentioned are strongly tied to the way patent system’s incentives work. There would be no reason to waste money on Claritin and Clarinex without patents, and there would be much less of a reason to pressure doctors if your company isn’t the only one selling it (think of it like Bayer trying to push aspirin today). Now, when it comes to producing redundant drugs, they are by no means the exception, and are closer to being the rule. The latest numbers I’ve seen put low priority drugs as the majority of new drugs being approved..

Some improvements could be made by not providing any NIH funding to low priority drugs, but as long as it’s profitable to do so, this money will be wasted because of incentives the patent system brings. For the slightly improved versions of an existing drug, your idea of longer protection periods would actually make things worse since research on the new version is generally timed so that market approval coincides with the expiration of the patent. If a Claritin-type patent lasts 5 years after a drug gets to market, the Clarinex-type drug will be delayed for 5 years. If a Claritin-type patent lasts 15 years after a drug gets to market, the Clarinex-type drug will be delayed for 15 years.

john whiteDecember 28, 2010 3:15 pm

Okay, Bobby, look around at all the innovation raging among countries without patents. Hmmm, not much. Perhaps you forgot why the USSR collapsed, or why China has decided the “market” is what their future should include. Gov’t, in the end, cannot do it all.The Salk model (“let’s just do it for mankind”), in the long run, loses out just like the Trabant, Volga, etc. all products of gov’t. (Forgetting the “kitchen debate” between Nixon and Khrushchev?) I am not saying the market provides all the answers, but it certainly provides more and better answers than the gov’t.

NIH funds stuff that is presented by 3rd parties in response to the usual gov’t RFPs. Not innovative itself, but it does provide data on which to build, etc. It is a useful, but not per se innovative, function that NIH and gov’t contracting generally serve.

The patent system is based on private property rights. You have a right to what you create. That conceptually is what is secured in the Constitution. The patent system makes this right tangible in a free market way. No patents, no private rights, no “market” in tangible form for innovation. Innovation then becomes like anything else with no market……zero. (Tried to sell your house …lately?) Salk created the solution to a problem, ie, a market existed for his solution. Just like a flue shot. But……what about flight, radio communication, steam power, the phonograph, etc, for which there is no “public” harm occurring that can form the basis of necessitating a solution. No solution arises without a specified gov’t need. Fortunately, that is not the way the USA works, or is intended to work. The “market” is 80% of our economy and, I expect, is responsible for a like amount of innovation.

So, the patent system is here to stay. Now, since that is dispatched, let’s improve what we’ve got.

Blind DogmaDecember 28, 2010 3:32 pm

John,

You state several premises that are guaranteed to be filtered out:

“The patent system is based on private property rights. ”

“Fortunately, that is not the way the USA works, or is intended to work.”

Need I even go to:

“That conceptually is what is secured in the Constitution. ”

Bobby has refused to recognize the basic premises of Patent Law. His idea of “improvement” needs to be built on the solid foundation rather than his ideological shifting sands.

As Barry points out, this is not likely to happen. The problem Bobby has is his framing of the problem. It is an ideological quagmire that no level of “facts” will overcome.

Ron HiltonDecember 28, 2010 3:52 pm

“One thing that often doesn’t go into consideration is that adequate thought is not given to what things would actually be like without patents.”

Without patents, the only property would be physical resources and cash, the very things that big companies abound in. Patents may not completely level the playing field, but a patent is the only thing that gives the little guy with a good idea any leverage at all. The fact that the big company has a bigger portfolio doesn’t matter if the little guy has at least one good patent that the big company needs/wants (even if all they want to do is bury it).

Big business unfortunately shares some attributes with big goverment. Very efficient at some things where economy of scale matters, but very bureaucratic and prone to smother innovation. So those who see big government as the answer tend to discount the importance of patents. The best results for society occur when the innovation of the entrprenuerial startup is combined with the resources of the big agency/university/institution/company/investor, and patents are a big part of enabling that to work in a free market.

BobbyDecember 28, 2010 4:21 pm

@John
Does a basic grasp of the scientific method escape you? The USSR and China are very poor controls for comparison, because there are tons of factors that differ besides the patent systems, such as other recognized individual rights. A much better analog would be comparing the US and UK to European countries that had not yet adopted patent systems, some waiting as late as until the end of the 19th century to adopt a patent system that was enforceable in any real way. There are still many cultural, legal, and economic differences that must be accounted for as well as spillover, but they are much closer to the US and UK of that era.

Also, you seem to be differentiating between government intervention and patents. Patents are entirely the product of government intervention. Without them, people will freely copy ideas, just as an engineer today can freely use any idea that predates 1990 (some surviving US submarine patents excluded). You should also note that SCOTUS rejected the ‘sweat of the brow’ doctrine you are speaking of in Feist v. Rural. This by no means indicates that they are bad. The government intervention of public education is generally regarded as positive. The NIH funding of pharmaceuticals is generally regarded as positive as well.

@Ron
“Patents may not completely level the playing field, but a patent is the only thing that gives the little guy with a good idea any leverage at all.”
That, a first mover’s advantage, and the ability to more quickly adapt to changing market. The odds aren’t good either way, and that’s an inevitability. However, as I explained, in most cases patents are going to result in a greater competitive advantage for the big company, though, at least if one if going to compete in the market.

“The fact that the big company has a bigger portfolio doesn’t matter if the little guy has at least one good patent that the big company needs/wants (even if all they want to do is bury it).”
The number of patents is not what matters, and my apologies if I wasn’t clear about that in my example. What matters is how capable a portfolio is of excluding one’s competitors from being competitive. This factor still favors large firms in virtually all situations.

There is an exception in non-practicing entities. They can gain a competitive advantage from the patent system because they are immune to a countersuit. However, there is often less money to be made in being an NPE, and they don’t do much for market forces because they by definition do not compete with large firms. That means being an NPE is likely unfavorable for both inventors and society.

Gene QuinnDecember 28, 2010 4:54 pm

Bobby-

You say: “SCOTUS rejected the ’sweat of the brow’ doctrine you are speaking of in Feist…”

First, Feist was a copyright case, not a patent case, so it is inapplicable to the discussion.

Second, John didn’t mention “sweat of the brow.” The closest he came was recognizing this truth: “You have a right to what you create.” So you seem to equate the Feist copyright law that says you are not entitled to a copyright just because you created something, while simultaneously ignoring that the patent laws say that if you do create something unique you ARE entitled to rights in what you create. Apples and elephants Bobby. Doesn’t it ever get tiresome?

-Gene

BobbyDecember 28, 2010 5:18 pm

@Gene
Copyright and patents both stem from the same clause, so their justification is of a related nature.

“The closest he came was recognizing this truth: “You have a right to what you create.” ”
That’s specifically what the sweat of the brow doctrine is about. That effort creates ownership. However, we don’t give patents for working hard on an idea, we give patents for disclosing a useful invention. And we have very specific criteria for how one gets a patent. The nature of patents in the US is practical, and the stated purpose is to be a ‘catalyst’ or ‘fuel’ for innovation.

Acknowledging this doesn’t mean that you have to be against patents. It’s actually a much more convincing argument for society waiving their rights than believing that inventors have an inherent entitlement. You claim that patents work in the practical way I described, so why is this not not adequate for why we have patents?

Ron HiltonDecember 28, 2010 7:05 pm

If we’re going to discuss doing away with the patent system, I’d like to hear some opinions regarding doing away with antitrust law.

Blind DogmaDecember 28, 2010 7:17 pm

“so their justification is of a related nature.”

Bobby, bobby, bobby,

We have been through this before. “justification” just is not the same as “legal basis.” Blindly you stumble (again and again). Ignoring the basics of law is just no way to go through life, son.

As for your “ However, there is often less money to be made in being an NPE, and they don’t do much for market forces because they by definition do not compete with large firms. That means being an NPE is likely unfavorable for both inventors and society.”

You clearly do not have the slightest idea of what you are talking about.

And just as an aftertaste, let me introduce one of Gene’s favorite parts of the law: 35 USC 103(a): “Patentability shall not be negatived by the manner in which the invention was made.”

Try to think “inspiration”, not “perspiration.” – Or better yet, even just dumb unthinking luck is enough to earn a patent – there’s hope for many.

Blind DogmaDecember 28, 2010 7:19 pm

Ron,

There is a nexus between antitrust and patent law – but you still need to understand that it is patent misuse that will get you in trouble, and never patent use.

You edge towards Bobby with your “doing away” thoughts – just because things are complicated, does not mean that getting rid of them would make things better.

Blind DogmaDecember 28, 2010 7:21 pm

And by the way Bobby, that lovely piece of law in 103(a) was a direct slap at (and refutation of) Justice Douglas, whom you mirror in your flash-of-genius leanings.

It’s all about the law, Bobby.

Ron HiltonDecember 28, 2010 7:38 pm

Just for the record, I am not in favor of abolishing either patent law or antitrust law, if that wasn’t already clear from my earlier comments. But I believe that both areas would benefit from reforms along the lines that described.

Normally when you are dead wrong factually you give. So why shift the debate regarding Feist when proven wrong? Of course the same very basic justification exist for patents and copyrights, but the law is exceptionally different. If you don’t know that then everything you write is tainted by an acute and screaming lack of understanding.

So the point remains, you bringing up Feist in a patent debate is nonesense.

Thanks though for stirring everyone up. You are so wrong that everyone wants to take a swing today it seems!

BobbyDecember 29, 2010 10:21 am

@BD
The legal basis of patent law is that you must meet certain requirements to get a patent for a limited time. This is far different from ‘you have a right to what you create.’

“Try to think “inspiration”, not “perspiration.” – Or better yet, even just dumb unthinking luck is enough to earn a patent – there’s hope for many.”
I didn’t say anything to the contrary. I specifically said that it is not effort that creates ownership.

“It’s all about the law, Bobby.”
The law is about the law, but good policy is about economics. Law ideally should be based around what is practical, so if our patent system or parts of it are impractical, they should be changed. That doesn’t mean SCOTUS is going to strike them down, but rather that it’s in our best interest to improve problems with our policies.

@Gene
I wasn’t claiming that they were the same, but that some principles that apply to one will apply to the other. As I’ve said already here, our policies are different from ‘you have a right to what you create’. Feist is probably the closest relevant example because our patent policy has never been that you have an inherent right to what you create under patent law, so there was no need to get this idea to a high court. Novelty, utility, and following the specific rules for application have been in the US patent system for its entire history. The difference between the two viewpoints being debated here is whether patents are to be based around the welfare of the public or the welfare of inventors, and our policy is at least intended to be based around the welfare of the public.

It is also quite interesting that you’ve taken an opportunity to take the conversation on this tangent because you apparently can’t put up a defense to my more direct argument with you.

john whiteDecember 29, 2010 12:47 pm

Bobby:

You’re cutting a pretty fine line on the perspiration v. inspiration distinction. As for a patent in the U.S.: You are entitled to what you create. The limits are only 35 USC 101, 102, 103, 112. It has to be, to wit: useful appropriate subject matter; new; nonobvious; and, sufficiently enabled for others to practice. How the invention is created is of no moment. Edison said invention is 99% perspiration and 1% inspiration. I don’t argue with the greatest inventor in recorded history. You’re entitled to the sweat of your brow, subject to the limits of the statute.

Only elitists do not comprehend that we are not all in the same boat. The welfare of inventors and the welfare of the public are one in the same. All members of the public could be inventors, and all inventors are members of the public. An inventor may/may not reap any direct benefit from their patent. Most (98%) do not. If a patent is an incentive for them to disclose, and the public benefits from that disclosure, how is such a system built around the “inventor’s welfare”? It seems to me the public is, by far, the greater beneficiary. Patents dispense with the BS (clique based and thusly limited) of peer review. Patents are what they are from the sublime to the ridiculous. Very democratic.

In short, the US patent system is an unmitigated blessing. It may need occasional adjustment to keep it on track to its goal. The IV article I wrote was directed at not undermining the incentive of pursuing patents. If all patents in selected tech sectors are reduced in value by a single large player, the inventing will drop off significantly.

Blind DogmaDecember 29, 2010 1:34 pm

Ron,

I apologize if I took your “doing away with antitrust law” at comment 59 to be a call for abolishing antitrust law. Somehow I misunderstood you.

As for “patent misuse,” I would suggest Googling the subject and learning for yourself (Chisum would be a reputable source) – I do not know at what level your current understanding is at, and I am not willing to take the time to teach you from scratch. The distinction that I am making (a la Bobby), is that if you do not know or understand patent law (or even care to know or understand) and just want to throw ideas out there that fit into a personal philosophy, then venturing into the intricate interplay between patents and antitrust will surely lead you into trouble. There is indeed something that can be called “patent misuse”, which is to say, actions beyond the perfectly legal right to exclude as earned by a patent holder. How is anyone expecting those who wish to enforce extra post-grant requirements of those who do not understand the basics of Quid Pro Quo to understand such a nuanced intersection?

I am reminded of the scene from Zoolander, and picture Bobby cavorting at the gas station, pausing only to strike up a smoke.

I do hope that you are not one of his male model friends.

BobbyDecember 29, 2010 2:02 pm

John,
“The welfare of inventors and the welfare of the public are one in the same. All members of the public could be inventors, and all inventors are members of the public. ”
It’s true that there isn’t a strict dichotomy between inventors and the public, but what is optimal for inventors when they are acting as inventors and what is optimal for the public is not identical. While something similar applies to many aspects of patent policy, one of the easiest things to point out such disparity would be a difference in number of years of protection granted by a patent. While an inventor is wearing the hat of an inventor in regards to their own patents (in other words, excluding the realities of how the patents of others are limiting), a longer period of protection is better for them without any limits. There’s a certain point where the diminishing returns from additional years are insignificant, but it’s still an improvement. However, the effects of a longer patent period on society are mixed. Longer periods provide larger incentives and at least in theory result in more effort being put into research, but after a certain point, the benefits will no longer be worth the costs to competitive markets that society bears because of a patent’s lawful monopoly. That means that for society, there is an optimal period for patents where any longer or shorter is less favorable (although the ideal period very well may vary greatly over time as the environment changes). As I’ve said, a similar concept of an ideal policy for the public applies in other areas, such as standards of obviousness, and responsible politicians would aim to fit those ideals as best as we can.

“If a patent is an incentive for them to disclose, and the public benefits from that disclosure, how is such a system built around the “inventor’s welfare”? It seems to me the public is, by far, the greater beneficiary.”
Directly, the public doesn’t really get that much. If something could effectively be kept a secret and used for more than 20 years, relying on trade secrets would be the better choice for them (although there admittedly is some degree of leeway with the rate and efficacy of reverse engineering not being 100% predictable). Assuming they act in their own self-interest, they will make the choice that is better for them and only apply for patents where the effective lifespan of exclusivity without patents is less than 20 years, making the disclosure itself not exceptionally useful, while the inventor gets a greater period of exclusivity.

Where the public theoretically benefits is that by allowing inventors a limited monopoly, inventors have a better chance at getting a return on investment, and thus have incentives to focus more resources towards invention. There are similar mindsets behind many public institutions and practices. We subsidize agriculture not because farmers are great, special people who deserve to be given money, but because there are many economic factors that make other careers and uses of land more favorable to farming, while availability of food is incredibly important to society, and giving additional financial incentives for farming results in greater availability of food. If the policies behind agricultural subsidies are well planned, than society gets a good return on their investment of resources. Our policies in this case are hopefully public-centric as opposed to farmer-centric. One case where they might be seen as farmer-centric is the level of subsidies we have for corn, which many have accused as being much too large, and thus a poor investment.

I just can’t wait for the policy discussion of paying people not to farm for the “greater availability of food” logic(?) .

Was there an actual answer buried somewhere in there Bobby? How many angels are there dancing on the head of that pin?

BobbyDecember 29, 2010 3:20 pm

@BD
Who said anything about paying people not to farm? We are paying* people to farm, and it’s hopefully resulting in better availability of food. It’s a much more direct incentive than the way the patent system works, and to the best of my knowledge nobody is getting paid for not infringing patents (if such a system exist, I would very much like to be informed of this). Back on track in regards to responsible policies, if we find that the market conditions will bring us adequate amounts of food on it’s own with no other dire consequences, we would be wise to stop giving those subsidies.

*just for the sake technical correctness, our agricultural policies may consist of other things than direct payment, such as tax breaks, special loans, and maybe a few other contracts, but I think for the sake of a simpler argument we can agree to treat the policy like direct payment.

Blind DogmaDecember 29, 2010 3:48 pm

“Who said anything about paying people not to farm? ”

Bobby, don’t tell me that you are ignorant in this area as well. You do realize that farm “policy” also includes paying farmers NOT to farm, do you not? Seriously, do you always engage in discussions in such a clueless manner? And here I thought it was merely patent law that you talked about without critical knowledge.

I am sure that you do not realize how dangerous it is for you to so bllindly want policy changes on such little foundational knowledge.

Time to wake up and ground yourself in reality.

BobbyDecember 29, 2010 4:42 pm

@BD
I seem to recall something like that being done during the Great Depression, but I wasn’t aware that it was still widely used. My apologies for using a somewhat flawed example. I made a bit of a mistake, but I didn’t really claim that paying farmers to farm was the entirety of our agricultural policy, and it was for the purposes of an analogy anyway, so the complexities of our actual agricultural policy aren’t that important to the conversation at hand.
My central point is that an ideal patent policy for the public is that which is ideal for the public, which is not inherently the same as what is ideal for inventors. Some conditions may be better for both than another set of conditions, but responsible policy will be focused on what is ideal for the public.

Blind DogmaDecember 29, 2010 5:43 pm

“My central point is that an ideal patent policy for the public is that which is ideal for the public”

And your central point is wrong. The ideal is not having a thumb on the scale – it is not “Less-Quid-Pro-More-Quo.” The ideal is “balance” – whatever that means. It is Quid Pro Quo. Do you begin to see why I harp on you so vehemently for you to understand the actual basics in play here?

The Quid Pro Quo – And the People through the legislature have spoken as to what that means. Unfortunately for you and for your agenda, it is not what you want. It is not what you feel it should be.

Your continued willful blindness to that actual Quid Pro Quo is directly related to the amount of Kool-Aid you have drunk. I need to usher you quietly into a backroom, lest your blind drunkeness ruin my sales.

Ron HiltonDecember 29, 2010 7:12 pm

BD, let me rephrase my question. You appeared to imply that my invoking antitrust as a potential remedy failed to distinguish between patent misuse and patent use. Can you give a concrete example of where an otherwise valid antitrust argument would be trumped by a valid patent use argument?

Blind DogmaDecember 29, 2010 8:03 pm

“You appeared to imply”

No. You inferred incorrectly.

Let me rephrase my statement – There is a difference between patent use (as fully allowed by law) and patent misuse (which may impugn some of the antitrust law).

I never said that valid antitrust arguments would be trumped by valid patent use arguments. The nuance is that to be “valid”, the antitrust argument cannot impinge the valid patent rights (as fully allowed by law).

Of course what gets interesting is the right-hand-not-knowing-what-the-left-hand-is-doing between those in charge of these two areas of law.

Ron HiltonDecember 29, 2010 10:00 pm

Yes, that’s precisely my point, that the left hand and the right hand need to get on the same page, so that questions of patent infringement vs. antitrust violation can be decided in a more consistent and coordinated way.

Ron HiltonDecember 29, 2010 10:04 pm

… and that the overarching goal in reconciling patent law and competition law should be to promote innovation and free-market economics.

BobbyDecember 30, 2010 10:49 am

@BD
My central point was basically the law of identity. A=A
Anyway, where we are disagreeing is whether a balance between the public’s interests and inventors’ interests is a appropriate system or if a tradeoff for the public between having useful ideas and being able to use those ideas is more appropriate.

The public’s role in the patent system is involuntary. Individuals and businesses can’t pick and choose which patents they want to accept and which one’s they do, and rights to utilize ideas are taken away from the public temporarily by the patent’s monopoly. Inventor’s involvement with the patent system is entirely voluntary. An inventor can decide whether or not they would like to try and get a patent on a particular invention, and if they have multiple inventions, they can decide which ones they want to use patents and which ones they don’t. Since an inventor pays no involuntary cost and the public does, there is a very strong reason for the interests of the public to be represented and not a reason for the interests of the inventor to be directly represented.

Gene QuinnDecember 30, 2010 11:00 am

Bobby-

You say: “Anyway, where we are disagreeing is whether a balance between the public’s interests and inventors’ interests is a appropriate system or if a tradeoff for the public between having useful ideas and being able to use those ideas is more appropriate.”

Your “tradeoff” presumes that without patents the public would gain the benefit of the useful ideas and inventions right away. The reality, however, is that without strong patent rights the public would never gain those benefits because the ideas or inventions would not exist. They would either be kept as trade secrets or simply not pursued because it is not economically wise to spend money to create an invention and then allow society to free ride on your investment.

You can point to Jonas Salk if you want, but we both know that relying on the benevolence of innovators is a recipe for having little or no innovation. All you have to do is look at the controlled study in the US. When patent rights were weak there were far fewer patent applications filed. So that means that either folks were not innovating or they were keeping it to themselves. It doesn’t take a rocket scientist to be able to figure this out. You simply cannot expect individuals and companies to invest in innovation when what they come up with is free to be copied immediately.

-Gene

Blind DogmaDecember 30, 2010 12:03 pm

Bobby,

Gene is too nice to you. Quite directly, you are wrong.

Regarding your comment of “My central point was basically the law of identity. A=A“, again I say that you are wrong. You now want the point to be a tautology, thinking that your beloved ideology cannot be wrong, but your ideology is wrong. Also, your central point is not a statement of identity, because you assume that you are right in your beliefs. As I pointed out, there are two sides here, and you do not get to put your thumb on the scale and say “Less-Quid-Pro-More-Quo.” You (again) fail to understand the balance of Quid Pro Quo.

You are doomed to continue in error until you understand the basics. Wake up.

BobbyDecember 30, 2010 12:44 pm

@Gene
“Your “tradeoff” presumes that without patents the public would gain the benefit of the useful ideas and inventions right away.”
I’m not assuming that at all. The right to do something you don’t know how to do is still a right, although it’s value is rather small. The importance of this right is increased if someone else would have come up with the idea or if the idea being utilized could have been reverse engineered in less than 20 years. As I said before, it’s quite unlikely that someone who could effectively protect something for more than 20 years would seek a patent, at least if they weren’t just being mildly altruistic, which is something you don’t want to count on.

Now, bear in mind that seeing this as a tradeoff doesn’t mean that a patent system can’t be just. If the ideal tradeoff for the public is granting patents, then the patent system is justified. You seem to hold that the public does benefit from our current patent system, don’t you? If so, even if our system could be improved, the tradeoff is at the very least favorable to no patent system from the public’s viewpoint. So why does this notion of a tradeoff bother you?

“You can point to Jonas Salk if you want, but we both know that relying on the benevolence of innovators is a recipe for having little or no innovation.”
I’m not talking about relying on benevolence. There are advantages to innovating even without the patent system. We made progress before the patent system, and we would have continued to do so without it The debate is how the patent system changes the way progress happens, and it’s a fairly complex matter because there are many factors that go into progress, and good science controls for outside factors as best as possible. Even the same country over time is not without flaws, because the future tends to have big technological advantages over the past.

“All you have to do is look at the controlled study in the US. When patent rights were weak there were far fewer patent applications filed. So that means that either folks were not innovating or they were keeping it to themselves”
That doesn’t mean anything at all. It could be that people freely published most everything without need for compensation, following Benjamin Franklin’s mantra that “as we enjoy great Advantages from the Inventions of Others, we should be glad of an Opportunity to serve others by any Invention of ours, and this we should do freely and generously.” More realistically, it means that people probably relied upon trade secrets, first mover advantages, and the like to get a return on investment, and that knowledge disseminated to the public largely through reverse engineering and other methods. One likely change is that more of the changes were incremental, because incremental changes require less investment and thus are easier to get an adequate return on. However, that difference is not inherently good or bad, because a lot of small changes can be better than a few big changes and vice versa.

@BD
Ideal for the public = ideal for the public is A=A. You may contend that the ideal public policy is not the policy that is ideal for the public, but why should an entity that isn’t losing anything it doesn’t chose to forfeit be represented directly in the equation? If the USPTO was raiding labs and forcefully publishing research of inventors, I would agree that their interests should be represented, but I’m not aware of that happening.

Ron HiltonDecember 30, 2010 1:01 pm

In a way we do have a present-day example of what it would be like without the patent system, in the “free software” movement (as distinct from open source, which is a development methodology that can be applied to both free and proprietary software). Although free software advocates rely heavily on copyright for IP protection, they are stridently opposed to patent protection for software. So the question can be asked, is more innovation occuring in free software or proprietary software? I think the answer is fairly clear. Most free software is simply a clone of its proprietary counterpart.

Gene QuinnDecember 30, 2010 2:36 pm

Bobby-

You say: “We made progress before the patent system…”

I’d love for you to elaborate on that point. Given that the US has had a patent system since 1790, and the UK since well before that, I am anxious to hear you talk about how innovations in Medieval Times proves that we don’t really need a patent system because we made progress then without patents.

-Gene

BobbyDecember 30, 2010 4:16 pm

@Ron
The differences between free software and open source is mostly in the philosophy of people behind it, but the licenses used are for virtually all use cases the same. Some FOSS companies such as Red Hat do apply for defensive patents, but they are largely opposed to patents in generally. I will concede that most FOSS is a largely a clone of existing software, but it’s also worth noting that most proprietary software is largely a clone as well. In the past 20 years, a lot of the innovation in software has been on the web, both on the front end and the back end. It’s also a fairly level playing field, since FOSS had gotten off the ground by that point. GNU/Linux, Apache, Mysql, PHP/Perl/Python have resulted in a lot of progress, and are widely seen as innovating the web as we know it today. This site itself utilizes WordPress, and many of the popular CMS solutions are themselves FOSS, including Drupal, which the White House uses and has recently contributed to.

@Gene
I didn’t say that making progress in the past doesn’t mean that patents aren’t a better way to promote progress. I’m saying that progress still occurs with or without patents. Thus the argument isn’t about progress or no progress, but the difference between what we get with and without the patent system, and even with different patent policies.

It’s also worth noting that many European countries were later than the US in adopting patent systems, and when they did, it may have been a long time in before their system was in any way effective. Furthermore, there were often big discrepancies between the patent policies that different countries had. However, it wasn’t as if by any means that only the British and US made significant progress during that time. Of course, control must be done as well as possible for knowledge spillover between countries with and without patents, as well as differing policies in other areas. The US Bill of Rights, for example, has a lot of features that were much more favorable to individuals, inventors or not, than other countries. After all, technological progress is multifaceted, and patents are far from the only significant factor involved.

Gene QuinnDecember 30, 2010 5:56 pm

Bobby-

You say: “I’m saying that progress still occurs with or without patents. Thus the argument isn’t about progress or no progress, but the difference between what we get with and without the patent system, and even with different patent policies.”

Right, and what I am asking for is proof. In the US we have had a patent system since 1790, and then the law of the UK applied before that, which recognized patents long before that. So I am asking you to provide proof that a suitable level of progress occurs without patents, as you suggest. You don’t seem to want to address that because the proof that is out there clearly cuts against you. There are no controlled studies of progress without a patent system, but plenty of controlled studies to demonstrate there is no progress until a patent system is adopted.

So if you have any evidence pre 1790 or pre the 1600s when the Statute of Anne was adopted I’d love to hear them and see what, if anything, we can learn from progress over 400 years ago when people lived in feudal societies and Kings, Emperors and Lords hired engineers to innovate for them, the same way corporations hire scientists and engineers today.

-Gene

Ron HiltonDecember 30, 2010 6:30 pm

An example that would be relevant both to IV and FOSS is Apple iOS vs. Android. Apple is suing HTC for patent infringement based on Android, and IV is suing both of the them. So we have a proprietary software vendor suing an open software vendor who are both being sued by a troll. Who is right and what would be the most desirable outcome for society and the economy? Kill Android so Apple can rule the market with the iPHone? Kill the whole product category? Increase the price of Android to pay whatever royalties Apple demands? Increase the price of the whole product category to pay whatever royalties IV demands? I keep coming back to antitrust law as the only available legal tool to deal with these questions. Is it the right tool for the job? How could it be improved so as to address these questions more effectively and expeditiously? If an antitrust countersuit is brought, which case should be decided first? Could they be heard together and a single decision reached, or must they be argued consecutively?

BobbyDecember 30, 2010 6:48 pm

You seem to be misunderstanding. Comparisons over time are quite difficult to do well, since people in the future have access to the technological knowledge of the past and the improvements made sense then, as well as generally a trend for greater literacy, health and communications. The ideal point of comparison would be largely similar nations with or without patents during the same time period. Petra Moser, an assistant professor in economics at Stanford, compared World’s Fair exhibits from Northern European countries that were well controlled for other factors like climate and culture using data from two 19th century World’s fairs. She found that “Countries without patent laws brought large numbers of innovations to the fairs and received a disproportionate share of awards for high quality innovations. For example, mid-19th century Switzerland (which didn’t have patents at the time), had the second highest number of exhibits per capita in 1851.”

Ron HiltonJanuary 3, 2011 7:24 pm

BTW, this article appears to have confused two different MIcrosoft-billionaire-funded patent trolls starting with the letter “i”:

Interval Licensing, the IP remains of Interval Research, founded in 1992 by Paul Allen to develop internet-oriented consumer technology, which filed suit against AOL, Apple, eBay, Google, Netflix, Office Depot, OfficeMax, Staples, Yahoo, and YouTube on August 27, 2010. The suit was dismissed for lack of detail on December 10, 2010, and and re-filed on December 28, 2010 with a more detailed complaint.

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